Mar 1, 2013

Abbey Joseph Cohen on missing the stock market rally

Short-term concerns about the automatic spending cuts notwithstanding, my models peg fair value for the S&P 500 index (^GSPC) at 1,575 - a 4 percent premium to Thursday's close. There are other models, including the Fed model, that show fair value as high as 1,700 or 1,750.

[The rally] is supported by improving fundamentals in the U.S. economy and, very importantly, valuation. [With] equities at a (price-to-earnings) ratio at 14 times earnings, they're just not expensive.

Our sense is that there is a lot of cash on the sidelines.  Investors may do well to put that money to work in stocks - or to shift out of longer-term bonds into stocks, the better investment.

But even in a rising interest rate environment, equity bull markets historically retain some strength for a while, as the market responds to an improving economy.   ~ Abbey Joseph Cohen, Senior Investment Strategist, CNBC, March 1, 2013

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